New students based in England face student loans on revised terms when they begin their courses this autumn. The terms of Plan 5 are:

• The maximum period their student loan can last will be 40 years (from the April after ending the course), whereas for earlier students the maximum repayment was mostly 30 years.
• Repayment will be at the rate of 9% of income above £25,000 (fixed to April 2027, after which inflation-linked increases are planned). The threshold for existing Plan 2 graduates is £27,295.
• The rate of interest matches inflation, measured by the Retail Prices Index (RPI), against RPI+ 3% for the previous generation of loans. However, currently both generations are capped at 7.3% (1 September 2023 to 30 November 2023).

Under the new loan scheme approximately half of students in England will repay their loan in full. Each of the devolved nations has its own, similar student loan structure but none has followed the English reforms – yet. Maintenance support rates also differ – Scotland’s maximum for students living away from home and studying in London is £9,000, whereas for Wales it is £14,635.

If you have children or grandchildren at, or hoping to go to university, the question of student finance raises some difficult issues. Given that even under England’s new rules the odds are almost 50/50 that the loan will never be cleared, it makes little sense not to borrow, at least initially. On the other hand, that 9% repayment rate is akin to an extra tax. If you wish to help fund a university education for the young adults in your family, talk to us about the options available.